Since Malta joined the European Union, we have been experiencing parallel trading. Parallel trade is legitimate business in the EU. It occurs when a product placed on the market in one country is bought by an intermediary who exports it to a second country.
The pharmaceutical industry has long been exposed to parallel trade within the EU. I have discussed this during my visit to VJ Salomone and Novartis Pharma in Marsa as part of my constituency week earlier this year. The practice has grown in recent years to a level that has a significant impact on the distribution of medicines.
The parallel trade issue is not just about EU prices and the trade mark law. It is also about the degree to which international firms are allowed to price discriminate between markets. It is about the effectiveness of international competition and the willingness of the EU to promote free and open trade. This also concerns consumers gaining from the operation of a truly global market. The whole concept of Europe opening its borders to trade to the benefit of its citizens is reinstated, as well as not imposing barriers to trade for the benefit of corporate profits. Many goods sold by parallel traders within the EU retail at the same price as goods sold through established channels. Any price advantage is generally taken by the trader or the retailer as an extra profit. If a retailer manages to access cheaper stock, as it should as a capitalist enterprise, then that is welcomed.
Parallel trade is a possible route to reducing prices. If retailers, particularly discounters, are able to access goods from anywhere in the world then, given a properly functioning market, competition will help to drive down prices. To argue otherwise is either to have no confidence in the functioning of markets or to have no confidence in competition regulation. The bottom line is to make markets function effectively.
Lowering import prices through tariff reductions has been one of the main consumer benefits of the post-war era. Parallel trade encourages retailers to access goods at a lower cost than they would otherwise be able to source them. This is effectively offering the retailer a tariff reduction.
As post-war history tends to show, lower import costs lead to lower prices, consumers gain, commerce benefits and manufacturers are spurred on to become more efficient and utilise their resources more effectively and, therefore, more efficiently. Consumers are increasingly aware that parallel traded goods are not necessarily of inferior quality. What parallel trade does is provide a more realistic assessment of the value that consumers place on different distribution methods.
Parallel trading is highly controversial, not only because of the reported shortages of medicine in countries such as Greece but also because international pharmaceutical giants such as Eli Lilly and Pfizer claim that the trade threatens patient safety and compromises the security of drugs supply. Parallel traders deny this and argue that it provides the only competition in the supply of patented treatments, therefore reducing prices.
It is true that a price difference between the source and destination markets is a necessary condition but the issue is complicated by factors such as product availability, ease of establishing a stable supply line and the magnitude of the price difference.
Predicting the flow of parallel traded goods isn't always straightforward. The assumption that goods will pass from traditionally "low-cost" markets to "high-cost" ones is an oversimplification. There is documented evidence of pharmaceuticals, for example, being exported from country A to country B despite being more expensive on paper in country A. In this case, the drug involved was supplied to hospitals in country A at a discount and it was this hospital stock which was being exported.
Therefore, the parallel market provides consumers with price savings and/or improved product availability. It may also provide the consumer with a choice of suppliers that otherwise would not be open to them.
We have also listened to and valued the recent statements of the Chamber of Small and Medium Enterprises - GRTU regarding this matter. The global economy changes the economies of different countries around the world. The parallel market is used to move stock from one economy to another to the advantage of all. As long as it is not abused, this parallel trade has a positive impact on our economies.
Mr Casa is a Nationalist member of the European Parliament.
david.casa@europarl.europa.eu, www.davidcasa.eu